08-03-2023, 11:11 AM
Is anybody planning to exchange any of their JNJ for some KVUE?
Honestly, I've been googling a while and have yet to find a simple, clear explanation of the split-off and the dynamics behind an investor's decision to participate. Anybody want to weigh in?
For starters, if it were a spin-off, we'd keep all of our JNJ shares and just also get shares in the new company. The value of the JNJ shares would decline, as it loses a large segment of revenues. But you get that same segment of revenues in the new company, so the value proposition rests on whether there are reasons each company might do better apart than together (and there are plenty of arguments to make on both sides of that question).
But as a split-off, the decision for a JNJ shareholder seems way more complicated. If you choose not to trade any of your JNJ shares for KVUE, you're left holding the same number of shares in a smaller JNJ -- one without the many powerful brands going with KVUE. In exchange, presumably, the company you continue to hold -- JNJ -- will receive a very large infusion of cash from selling off KVUE. So in theory if you do no exchanging, you're kept whole, but the makeup of what you're holding changes significantly.
If you DO exchange, whether you're kept whole depends a lot on the price movement of the two tickers before, during, and after the split later this month. Even with the 7 percent "discount" they're offering on KVUE shares, this seems pretty impossible to predict. Or maybe it's just math that I don't see clearly yet.
In any case, I'm inclined to just hold on to all of my JNJ, not get distracted by the "discount," and just add KVUE to my watch list as a new-ish consumer staples company. I can buy it like anything else if and when it seems cheap and appropriate for my portfolio.
Any and all thoughts appreciated -- especially if I'm misunderstanding the situation!
Honestly, I've been googling a while and have yet to find a simple, clear explanation of the split-off and the dynamics behind an investor's decision to participate. Anybody want to weigh in?
For starters, if it were a spin-off, we'd keep all of our JNJ shares and just also get shares in the new company. The value of the JNJ shares would decline, as it loses a large segment of revenues. But you get that same segment of revenues in the new company, so the value proposition rests on whether there are reasons each company might do better apart than together (and there are plenty of arguments to make on both sides of that question).
But as a split-off, the decision for a JNJ shareholder seems way more complicated. If you choose not to trade any of your JNJ shares for KVUE, you're left holding the same number of shares in a smaller JNJ -- one without the many powerful brands going with KVUE. In exchange, presumably, the company you continue to hold -- JNJ -- will receive a very large infusion of cash from selling off KVUE. So in theory if you do no exchanging, you're kept whole, but the makeup of what you're holding changes significantly.
If you DO exchange, whether you're kept whole depends a lot on the price movement of the two tickers before, during, and after the split later this month. Even with the 7 percent "discount" they're offering on KVUE shares, this seems pretty impossible to predict. Or maybe it's just math that I don't see clearly yet.
In any case, I'm inclined to just hold on to all of my JNJ, not get distracted by the "discount," and just add KVUE to my watch list as a new-ish consumer staples company. I can buy it like anything else if and when it seems cheap and appropriate for my portfolio.
Any and all thoughts appreciated -- especially if I'm misunderstanding the situation!